"The sale of Barclays Africa and more PPI costs are the main culprits for the bank’s woes so far in 2017."
Excluding the effects of Barclays Africa, profit before tax rose 13% to £2,341 million. This was due to the non-core segment of Barclays reducing losses from £1,904 million last year to £647 million this year.
The Barclays core business saw a 25% fall in profit before tax from £3,967 million to £2,988 million. Within this, Barclays UK was responsible for most of the fall, with profit before tax falling 41% from £1,080 million to £634 million, thanks to PPI charges and last year’s figures being boosted by the £151 million sale of Visa Europe.
The bank’s pension scheme deficit rose to £7.9 billion, from £3.6 billion at the last funding valuation in 2013, and Barclays has paid £620 million of deficit reduction payments so far in 2017. The rising deficit is largely down to falling gilt yields, and will require Barclays to pay an extra £4.5 billion into the pension scheme, though over an extended period of 10 years.
The bank has closed down its non-core division, with the remaining parts of these businesses now due to be integrated into the core segment.
Laith Khalaf, Senior Analyst at Hargreaves Lansdown, commented: "This is a perplexing set of results, the bad bank is getting better, but the good bank is getting worse.
"The sale of Barclays Africa and more PPI costs are the main culprits for the bank’s woes so far in 2017. More litigation problems are waiting in the wings, with the bank in trouble with the FCA, the SFO and the US Department of Justice, a formidable triumvirate of adversaries.
"The bank’s pension black hole has more than doubled in size since the last funding valuation, thanks to falling government bond yields. That’s going to cost the bank an extra £4.5 billion, spread over the next ten years. However in the madcap world of valuing pension liabilities, it’s entirely possible that the deficit may fall by the time the next valuation comes round in 2019, if interest rates have risen by then. Indeed the bank appears to have got the pension trustees to agree to weighting payments towards the end of the ten year period, presumably in the hope that rising gilt yields will make the problem go away by then.
"The bank’s restructuring is now complete, which is a significant milestone, but now Barclays is in the shape envisaged by management, the pressure is on to perform.
"To that end its figures for 2017 are far from convincing, with the core bank floundering, and progress actually coming from the non-core. The market will be hoping for a bit more positive news in the remainder of the year, though conduct issues may well overshadow the bank’s performance."
